Friday, October 08, 2010

Microsoft to Bid For Adobe

Shares of Adobe soared in heavy trading yesterday on a report that Microsoft CEO Steve Ballmer discussed a possible buyout of the company.

Based on the old saying "my enemy's enemies are my friends", Microsoft and Adobe have been long discussing joining forces agains Apple's control of the cell phone market.

Neither Microsoft nor Adobe had any comment. Both software companies are extremely successful software franchises with little or no overlap in their respective businesses. Adobe Systems Inc., based in San Jose, Calif., makes software such as Photoshop and the Flash technology used for Web videos and games. The company has been in a long-standing feud with Apple Inc. over Flash, which Apple bans from mobile devices including iPad and the iPhone.

Microsoft controls the office market in terms of content authoring via its Office franchise.  Adobe n the other hand controls the creative & digital publishing content supply chain. Merging the two firms would dominate how content is created, managed and distributed in every industry with serious implications to content-rich industries.  Even if a deal were to be hashed out due to anti-trust regulatory concerns over the companies' overlapping products, such as Flash and Microsoft's Silverlight, could prevent it from going through.

An Adobe acquisition would be a huge one for Microsoft, whose last big purchase was in 2007, when it bought aQuantive Inc. for $6 billion. A proposed deal to buy Yahoo Inc. the following year fell apart when Microsoft withdrew a $47.5 billion bid. Adobe's market cap is close to $15 billion.

Adobe ended the session up nearly 12 percent at $28.69, with trading volume more than six times the average. The shares were briefly halted earlier in the afternoon after they hit as high as $30.
In after-hours trading, the stock slipped 14 cents to $28.55. Microsoft ended trading up a dime at $24.53.
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